FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                    (X) QUARTERLY REPORT PURSUANT TO SECTION
                         13 OR 15 (d) OF THE SECURITIES
                              EXCHANGE ACT of 1934

               For the quarterly period ended September 30, 2004
   --------------------------------------------------------------------------

                                       OR

             ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
                     OF THE SECURITIES EXCHANGE ACT of 1934

For the transition period from ______________________ to _______________________


                             Commission file number
                                     0-21558
                     ---------------------------------------


                            CNL Income Fund XII, Ltd.
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)


            Florida                                        59-3078856
---------------------------------               --------------------------------
(State or other jurisdiction of                         (I.R.S. Employer
incorporation or organization)                         Identification No.)


        450 South Orange Avenue
           Orlando, Florida                                  32801
-----------------------------------------       --------------------------------
(Address of principal executive offices)                  (Zip Code)


Registrant's telephone number
(including area code)                                    (407) 540-2000
                                                --------------------------------


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by  Sections  13 or 15(d)  of the  Securities  Exchange  Act of 1934
during the preceding 12 months (or for such shorter  period that the  registrant
was  required  to file such  reports),  and (2) has been  subject to such filing
requirements for the past 90 days. Yes X No ____

Indicate  by check mark  whether  the  registrant  is an  accelerated  filer (as
defined in Rule 12b-2 of the Exchange Act):Yes___ No X


<PAGE>


                                    CONTENTS



Part I                                                                     Page

   Item 1.    Financial Statements:

                  Condensed Balance Sheets                                 1

                  Condensed Statements of Income                           2

                  Condensed Statements of Partners' Capital                3

                  Condensed Statements of Cash Flows                       4

                  Notes to Condensed Financial Statements                  5-6

   Item 2.    Management's Discussion and Analysis of Financial
                  Condition and Results of Operations                      7-10

   Item 3.    Quantitative and Qualitative Disclosures About
                  Market Risk                                              10

   Item 4.    Controls and Procedures                                      10

Part II

   Other Information                                                       11-12



<PAGE>

                            CNL INCOME FUND XII, LTD.
                         (A Florida Limited Partnership)
                            CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
<S><C>

                                                                           September 30,            December 31,
                                                                               2004                     2003
                                                                         ------------------      -------------------
                             ASSETS

Real estate properties with operating leases, net                        $      23,042,358       $       23,236,071
Net investment in direct financing leases                                        4,341,176                4,443,493
Real estate held for sale                                                        3,772,370                6,191,911
Investment in joint ventures                                                     1,735,795                1,749,787
Cash and cash equivalents                                                        5,193,751                2,084,914
Certificates of deposit                                                            554,301                  550,991
Receivables, less allowance for doubtful accounts
    of $176,678 and $170,957, respectively                                           2,840                    9,454
Accrued rental income, less allowance for doubtful
    accounts of $8,334 and $9,061, respectively                                  2,083,008                2,063,718
Other assets                                                                        54,720                   47,580
                                                                         ------------------      -------------------

                                                                         $      40,780,319       $       40,377,919
                                                                         ==================      ===================

               LIABILITIES AND PARTNERS' CAPITAL

Accounts payable and accrued expenses                                    $          73,778       $           25,794
Real estate taxes payable                                                           28,241                   16,504
Distributions payable                                                              956,252                  956,252
Due to related parties                                                              36,164                   19,503
Rents paid in advance and deposits                                                 240,669                  241,936
                                                                         ------------------      -------------------
    Total liabilities                                                            1,335,104                1,259,989

Minority interests                                                               1,201,126                1,217,270

Commitment (Note 3)

Partners' capital                                                               38,244,089               37,900,660
                                                                         ------------------      -------------------

                                                                         $      40,780,319       $       40,377,919
                                                                         ==================      ===================

</TABLE>


            See accompanying notes to condensed financial statements.

                                        1

<PAGE>

                            CNL INCOME FUND XII, LTD.
                         (A Florida Limited Partnership)
                         CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
<S><C>

                                                            Quarter Ended                    Nine Months Ended
                                                            September 30,                      September 30,
                                                       2004             2003              2004             2003
                                                   -------------   ----------------   --------------  ----------------
Revenues:
    Rental income from operating leases            $    747,425    $       765,711    $   2,224,349   $     2,233,428
    Earned income from direct financing leases          124,863            132,107          391,762           395,651
    Contingent rental income                              4,069              2,612           19,733            18,634
    Interest and other income                             1,162              1,743           32,649            11,827
                                                   -------------   ----------------   --------------  ----------------
                                                        877,519            902,173        2,668,493         2,659,540
                                                   -------------   ----------------   --------------  ----------------

Expenses:
    General operating and administrative                118,901             62,220          336,136           215,404
    Property related                                      1,295             14,936            9,124            17,867
    Management fees to related parties                   10,398             11,591           31,654            33,619
    State and other taxes                                    --                  9           54,905            43,004
    Depreciation and amortization                       132,632            134,185          396,874           399,246
                                                   -------------   ----------------   --------------  ----------------
                                                        263,226            222,941          828,693           709,140
                                                   -------------   ----------------   --------------  ----------------

Income before minority interests and equity in
earnings of unconsolidated joint ventures               614,293            679,232        1,839,800         1,950,400

Minority interests                                      (27,815)           (27,891)         (83,299)          (84,415)

Equity in earnings of unconsolidated joint
    ventures                                             37,251             40,708          112,760           124,910
                                                   -------------   ----------------   --------------  ----------------

Income from continuing operations                       623,729            692,049        1,869,261         1,990,895
                                                   -------------   ----------------   --------------  ----------------

Discontinued operations:
    Income from discontinued operations                  97,773             76,478          373,975           381,477
    Gain on disposal of discontinued operations              --                 --          968,949                --
                                                   -------------   ----------------   --------------  ----------------
                                                         97,773             76,478        1,342,924           381,477
                                                   -------------   ----------------   --------------  ----------------

Net income                                         $    721,502    $       768,527    $   3,212,185   $     2,372,372
                                                   =============   ================   ==============  ================

Income per limited partner unit:
    Continuing operations                          $       0.14    $          0.15    $        0.42   $          0.44
    Discontinued operations                                0.02               0.02             0.29              0.09
                                                   -------------   ----------------   --------------  ----------------
                                                   $       0.16    $          0.17    $        0.71   $          0.53
                                                   =============   ================   ==============  ================

Weighted average number of limited
    partner units outstanding                         4,500,000          4,500,000        4,500,000         4,500,000
                                                   =============   ================   ==============  ================
</TABLE>


            See accompanying notes to condensed financial statements.

                                        2

<PAGE>

                            CNL INCOME FUND XII, LTD.
                         (A Florida Limited Partnership)
                    CONDENSED STATEMENTS OF PARTNERS' CAPITAL
<TABLE>
<CAPTION>
<S><C>

                                                                           Nine Months Ended          Year Ended
                                                                              September 30,           December 31,
                                                                                  2004                   2003
                                                                         ---------------------    ------------------
General partners:
    Beginning balance                                                    $            259,109     $         259,109
    Net income                                                                             --                    --
                                                                         ---------------------    ------------------
                                                                                      259,109               259,109
                                                                         ---------------------    ------------------

Limited partners:
    Beginning balance                                                              37,641,551            38,228,265
    Net income                                                                      3,212,185             3,238,294
    Distributions ($0.64 and $0.85 per
       limited partner unit, respectively)                                         (2,868,756)           (3,825,008)
                                                                         ---------------------    ------------------
                                                                                   37,984,980            37,641,551
                                                                         ---------------------    ------------------

Total partners' capital                                                  $         38,244,089     $      37,900,660
                                                                         =====================    ==================
</TABLE>

            See accompanying notes to condensed financial statements.

                                        3

<PAGE>

                            CNL INCOME FUND XII, LTD.
                         (A Florida Limited Partnership)
                       CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
<S><C>
                                                                                   Nine Months Ended
                                                                                     September 30,
                                                                               2004                2003
                                                                          ----------------   -----------------

Net cash provided by operating activities                                 $     2,919,652    $      3,130,806
                                                                          ----------------   -----------------

Cash flows from investing activities:
    Proceeds from sale of assets                                                3,357,384                  --
    Additions to real estate properties with operating leases                    (200,000)                 --
                                                                          ----------------   -----------------
          Net cash from investing activities                                    3,157,384                  --
                                                                          ----------------   -----------------

Cash flows from financing activities:
    Distributions to limited partners                                          (2,868,756)         (2,981,256)
    Distributions to holders of minority interests                                (99,443)            (99,969)
                                                                          ----------------   -----------------
          Net cash used in financing activities                                (2,968,199)         (3,081,225)
                                                                          ----------------   -----------------

Net increase in cash and cash equivalents                                       3,108,837              49,581

Cash and cash equivalents at beginning of period                                2,084,914           1,274,469
                                                                          ----------------   -----------------

Cash and cash equivalents at end of period                                $     5,193,751    $      1,324,050
                                                                          ================   =================

Supplemental schedule of non-cash financing activities:

    Distributions declared and unpaid at end of
       period                                                             $       956,252    $        956,252
                                                                          ================   =================
</TABLE>

            See accompanying notes to condensed financial statements.

                                        4


<PAGE>

                            CNL INCOME FUND XII, LTD.
                         (A Florida Limited Partnership)
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
           Quarters and Nine Months Ended September 30, 2004 and 2003


1.       Basis of Presentation

         The accompanying  unaudited  condensed  financial  statements have been
         prepared in accordance  with the  instructions  to Form 10-Q and do not
         include  all  of the  information  and  note  disclosures  required  by
         generally  accepted  accounting  principles.  The financial  statements
         reflect all adjustments,  consisting of normal  recurring  adjustments,
         which are, in the opinion of the general partners, necessary for a fair
         statement of the results for the interim periods  presented.  Operating
         results for the quarter and nine months ended  September 30, 2004,  may
         not be  indicative  of the results  that may be  expected  for the year
         ending December 31, 2004. Amounts as of December 31, 2003,  included in
         the  financial  statements,  have been derived  from audited  financial
         statements as of that date.

         These unaudited financial statements should be read in conjunction with
         the financial statements and notes thereto included in Form 10-K of CNL
         Income Fund XII, Ltd. (the  "Partnership")  for the year ended December
         31, 2003.

         The  Partnership  accounts for its 59.05%  interest in  Williston  Real
         Estate Joint  Venture,  its 55% interest in Bossier City Joint  Venture
         and its 80% interest in CNL VIII, X, XII Kokomo Joint Venture using the
         consolidation  method.  Minority interests represent the minority joint
         venture partners' proportionate share of the equity in the consolidated
         joint ventures. All significant  intercompany accounts and transactions
         have been eliminated.

         In December 2003,  the Financial  Accounting  Standards  Board issued a
         revision to FASB  Interpretation  No. 46 (originally  issued in January
         2003)  ("FIN  46R"),  "Consolidation  of  Variable  Interest  Entities"
         requiring  existing  unconsolidated  variable  interest  entities to be
         consolidated by their primary beneficiaries. The primary beneficiary of
         a variable  interest entity is the party that absorbs a majority of the
         entity's expected losses,  receives a majority of its expected residual
         returns, or both, as a result of holding variable interests,  which are
         the ownership,  contractual,  or other pecuniary interests in an entity
         that change with  changes in the fair value of the  entity's net assets
         excluding  variable  interests.  Prior to FIN 46R, a company  generally
         included  another  entity  in  its  financial  statements  only  if  it
         controlled the entity through voting interests.  Application of FIN 46R
         is  required  in  financial  statements  of public  entities  that have
         interests in variable  interest entities for periods ending after March
         15,  2004.  The  Partnership  adopted FIN 46R during the quarter  ended
         March 31,  2004,  which  resulted in the  consolidation  of  previously
         unconsolidated  joint ventures,  which had been accounted for under the
         equity method. FIN 46R does not require, but does permit restatement of
         previously  issued financial  statements.  The Partnership has restated
         prior year's financial statements to maintain comparability between the
         periods presented.  Such  consolidation  resulted in certain assets and
         minority interests,  and revenues and expenses, of these entities being
         reported on a gross basis in the  Partnership's  financial  statements;
         however,  these  restatements had no effect on partners' capital or net
         income.

2.       Discontinued Operations

         During 2003, the Partnership  identified for sale three properties that
         were  classified  as  discontinued   operations  in  the   accompanying
         financial  statements.  The  Partnership  sold the  property  in Tempe,
         Arizona in December  2003.  During the nine months ended  September 30,
         2004, the Partnership  identified seven additional  properties for sale
         and reclassified  the assets to real estate held for sale.  Because the
         current  carrying  amount of these assets is less than their fair value
         less cost to sell, no provision for  write-down of assets was recorded.
         In March 2004, the Partnership sold the properties in Toccoa,  Georgia;
         Blue  Springs,  Missouri;  and  Fultondale,  Alabama to separate  third
         parties and  received  aggregate  net sales  proceeds of  approximately
         $3,357,400,  resulting in a gain on disposal of discontinued operations
         of approximately $968,900.

                                       5
<PAGE>

                            CNL INCOME FUND XII, LTD.
                         (A Florida Limited Partnership)
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
           Quarters and Nine Months Ended September 30, 2004 and 2003


2.       Discontinued Operations - Continued

         The operating results of these ten properties reflected as discontinued
         operations are as follows:
<TABLE>
<CAPTION>
<S><C>

                                                         Quarter Ended                 Nine Months Ended
                                                         September 30,                   September 30,
                                                      2004            2003             2004          2003
                                                 ---------------  -------------    -------------  ------------
                Rental revenues                  $      107,113   $    169,300     $    398,317   $   516,380
                Expenses                                 (9,340)       (35,116)         (24,342)      (77,197)
                Provision for write-down of
                      assets                                 --        (57,706)              --       (57,706)
                                                 ---------------  -------------    -------------  ------------
                Income from discontinued
                operations                       $       97,773   $     76,478     $    373,975   $   381,477
                                                 ===============  =============    =============  ============
</TABLE>


3.       Commitment

         In September  2004,  the  Partnership  entered into an agreement with a
         third party to sell the property in Simpsonville, South Carolina.

4.       Merger Transaction

         On August 9, 2004, the Partnership entered into a definitive  Agreement
         and Plan of Merger  pursuant  to which the  Partnership  will be merged
         with a subsidiary of U.S. Restaurant Properties,  Inc. (NYSE: USV). The
         merger is one of multiple concurrent  transactions pursuant to which 17
         other  affiliated  limited  partnerships  also  will be  merged  with a
         subsidiary  of  U.S.  Restaurant  Properties,  Inc.  and in  which  CNL
         Restaurant  Properties,  Inc., an  affiliate,  also will be merged with
         U.S.  Restaurant  Properties,  Inc.  CNL  Restaurant  Properties,  Inc.
         currently  provides  property  management  and  other  services  to the
         Partnership.  The merger of the  Partnership  (and each of the 17 other
         affiliated mergers) is subject to certain conditions including approval
         by a majority of the limited partners, consummation of a minimum number
         of limited partnership mergers representing at least 75.0% in value (as
         measured  by the  value of the  merger  consideration)  of all  limited
         partnerships,  consummation  of  the  merger  between  U.S.  Restaurant
         Properties,  Inc. and CNL Restaurant Properties,  Inc., approval of the
         shareholders of U.S. Restaurant  Properties,  Inc., and availability of
         financing.  The  transaction is expected to be consummated in the first
         quarter of 2005.

         Under  the  terms  of  the  merger  agreement,  if the  transaction  is
         approved,  the limited  partners  will receive total  consideration  of
         approximately  $45.35  million,   consisting  of  approximately  $37.92
         million in cash and  approximately  $7.43  million  in U.S.  Restaurant
         Properties, Inc. Series A Convertible Preferred Stock that is listed on
         the New York Stock  Exchange.  The general  partners will receive total
         consideration  of  approximately  $191,000  consisting of approximately
         $160,000 in cash and approximately $31,000 in preferred stock.

5.       Subsequent Event

         In  October  2004,  the  Partnership  sold the  property  in  Columbia,
         Mississippi   for  $652,000   and   received  net  sales   proceeds  of
         approximately  $646,600  resulting in a gain of approximately  $161,900
         which will be recognized in the fourth quarter of 2004.

                                       6

<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

         CNL Income Fund XII, Ltd. (the "Partnership,"  which may be referred to
as "we," "us," or "our") is a Florida limited  partnership that was organized on
August 20, 1991, to acquire for cash,  either  directly or through joint venture
and  tenancy  in  common  arrangements,  both  newly  constructed  and  existing
restaurants, as well as Properties upon which restaurants were to be constructed
(the  "Properties"),  which are leased  primarily  to  operators of national and
regional fast-food and family-style  restaurant chains. The leases are generally
triple-net leases, with the lessees responsible for all repairs and maintenance,
property taxes,  insurance and utilities.  As of September 30, 2003, we directly
owned 41 Properties and owned seven Properties  indirectly through joint venture
or tenancy in common  arrangements.  As of September 30, 2004, we directly owned
37 Properties  and owned seven  Properties  indirectly  through joint venture or
tenancy in common arrangements.

Merger Transactions

         The general  partners  believe their  primary  objective is to maintain
current operations with restaurant operators as successfully as possible,  while
evaluating  strategic  alternatives,  including  alternatives  that may  provide
liquidity to the limited  partners.  Real estate  markets are strong  throughout
much of the nation,  and the performance of restaurants  has generally  improved
after several  challenging years. As a result, the general partners believe that
this is an attractive  period for a strategic event to monetize the interests of
the limited partners.

         In furtherance of this, on August 9, 2004, we entered into a definitive
Agreement  and  Plan of  Merger  pursuant  to  which  we will be  merged  with a
subsidiary of U.S. Restaurant Properties, Inc. (NYSE: USV). The merger is one of
multiple concurrent  transactions  pursuant to which 17 other affiliated limited
partnerships  also  will  be  merged  with  a  subsidiary  of  U.S.   Restaurant
Properties,  Inc. and in which CNL  Restaurant  Properties,  Inc., an affiliate,
also will be merged with U.S. Restaurant  Properties,  Inc. Our merger (and each
of the 17 other affiliated  mergers) is subject to certain conditions  including
approval by a majority of the limited partners, consummation of a minimum number
of limited partnership mergers representing at least 75.0% in value (as measured
by  the  value  of  the  merger  consideration)  of  all  limited  partnerships,
consummation  of the merger  between U.S.  Restaurant  Properties,  Inc. and CNL
Restaurant  Properties,  Inc.,  approval of the shareholders of U.S.  Restaurant
Properties,  Inc., and availability of financing.  U.S.  Restaurant  Properties,
Inc.  is a real  estate  investment  trust  (REIT)  that  focuses  primarily  on
acquiring, owning and leasing restaurant properties. The transaction is expected
to be consummated in the first quarter of 2005.

         Under  the  terms  of  the  merger  agreement,  if the  transaction  is
approved, our limited partners will receive total consideration of approximately
$45.35  million,   consisting  of  approximately  $37.92  million  in  cash  and
approximately  $7.43  million  in U.S.  Restaurant  Properties,  Inc.  Series  A
Convertible  Preferred Stock that is listed on the New York Stock Exchange.  The
general  partners will receive total  consideration  of  approximately  $191,000
consisting  of  approximately  $160,000  in cash and  approximately  $31,000  in
preferred stock.

         We received an opinion from Wachovia  Capital  Markets,  LLC that as of
August 9, 2004 the merger  consideration  to be  received  by the holders of our
general and limited  partnership  interests is fair,  from a financial  point of
view, to such holders.

         As reflected  above, the  contemplated  transactions  are complex,  and
contingent upon certain conditions. The restaurant marketplace,  the real estate
industry,  and the equities markets, all individually or taken as a whole, could
impact the  economics of this  transaction.  As a result,  there is no assurance
that we will be successful in completing the contemplated transaction.

Capital Resources

         For the  nine  months  ended  September  30,  2004 and  2003,  net cash
provided by operating activities was $2,919,652 and $3,130,806, respectively.

                                       7
<PAGE>

         During the nine months ended September 30, 2004, we sold the Properties
in Toccoa, Georgia, Blue Springs,  Missouri and Fultondale,  Alabama to separate
third  parties  and  received  aggregate  net sales  proceeds  of  approximately
$3,357,400 resulting in an aggregate gain on disposal of discontinued operations
of  approximately  $968,900.  The general  partners  may  reinvest the net sales
proceeds in additional Properties or use the sales proceeds to pay liabilities.


         In  addition,  during the nine months  ended  September  30,  2004,  we
amended  the lease for the  Property in Tempe,  Arizona and as a result,  funded
$200,000  of  renovation  costs.  We are not  obligated  to fund any  additional
amounts in the future related to this lease amendment.

         At September 30, 2004, we had $5,193,751 in cash and cash  equivalents,
as compared to $2,084,914  at December 31, 2003.  At September  30, 2004,  these
funds were held in demand deposit accounts at a commercial bank. The increase in
cash and cash  equivalents  at  September  30,  2004 was a result of holding net
sales proceeds from the sales described  above. The funds remaining at September
30, 2004, after payment of distributions and other  liabilities,  may be used to
invest in additional Properties and to meet our working capital needs.

         In March 2004, we entered into an agreement  with a third party to sell
the Property in Columbia, Mississippi. In October 2004, we sold the Property and
received net sales  proceeds of  approximately  $646,600  resulting in a gain on
disposal of discontinued  operations of  approximately  $161,900,  which will be
recognized in the fourth quarter of 2004. We may reinvest the net sales proceeds
in an additional Property and use the sales proceeds to meet our working capital
needs.

Short-Term Liquidity

         Our  investment  strategy of acquiring  Properties for cash and leasing
them under triple-net leases to operators who meet specified financial standards
minimizes our operating  expenses.  The general partners believe that the leases
will continue to generate cash flow in excess of operating expenses.

         Our  short-term   liquidity   requirements  consist  primarily  of  our
operating expenses.

         The general  partners have the right,  but not the obligation,  to make
additional capital  contributions if they deem it appropriate in connection with
our operations.

         We  generally  distribute  cash  from  operations  remaining  after the
payment of operating  expenses to the extent that the general partners determine
that such funds are available for distribution. Based on current and anticipated
future cash from operations,  we declared  distributions to the limited partners
of  $2,868,756  for each of the nine months  ended  September  30, 2004 and 2003
($956,252 for each applicable quarter).  This represents  distributions for each
of the six  months  of $0.64  per  unit  ($0.21  per  unit  for each  applicable
quarter).  No  distributions  were made to the general partners for the quarters
and nine months ended September 30, 2004 and 2003. No amounts distributed to the
limited  partners  for the nine  months  ended  September  30, 2004 and 2003 are
required  to be or have been  treated as a return of  capital  for  purposes  of
calculating   the   limited   partners'   return  on  their   adjusted   capital
contributions.  We  intend  to  continue  to make  distributions  of cash to the
limited partners on a quarterly basis.

         Total liabilities,  including distributions payable, were $1,335,104 at
September 30, 2004, as compared to $1,259,989 at December 31, 2003. The increase
was due to an  increase in accounts  payable and accrued  expenses,  real estate
taxes payable and amounts due to related  parties.  The general partners believe
that we have sufficient cash on hand to meet our current working capital needs.

Contractual Obligations, Contingent Liabilities, and Commitments

         In March 2004, we entered into an agreement  with a third party to sell
the Property in Columbia, Mississippi. We sold this Property in October 2004. In
September  2004,  we entered  into an  agreement  with a third party to sell the
Property in  Simpsonville,  South  Carolina.  As of November 5, 2004, we had not
sold this Property.

                                       8
<PAGE>

Long-Term Liquidity

         We have no long-term debt or other  long-term  liquidity  requirements.

Results of Operations

         Rental revenues from continuing  operations were $2,616,111  during the
nine months ended September 30, 2004, as compared to $2,629,079  during the same
period of 2003,  $872,288  and  $897,818 of which were  earned  during the third
quarter  of  2004  and  2003,  respectively.  Rental  revenues  from  continuing
operations  were higher  during the quarter and nine months ended  September 30,
2003 in part because we collected and  recognized as income rent  deferrals from
prior years relating to the Property in Tucson, Arizona.

         We earned $112,760  attributable to net income earned by unconsolidated
joint ventures  during the nine months ended  September 30, 2004, as compared to
$124,910  during  the same  period of 2003,  $37,251  and  $40,708 of which were
earned during the quarters ended September 30, 2004 and 2003, respectively.  The
decrease  during the  quarter  and nine  months  ended  September  30,  2004 was
primarily  due to the January  2004  expiration  of the lease of the Property in
Kingsville,  Texas,  owned by Kingsville Real Estate Joint Venture,  in which we
have a 31.13%  interest.  The lost revenues  resulting from the lease expiration
will  continue  to  have  an  adverse  effect  on  the  equity  in  earnings  of
unconsolidated  joint  ventures if the joint venture is not able to re-lease the
Property in a timely manner.

         We earned  $32,649 in interest and other income  during the nine months
ended September 30, 2004, as compared to $11,827 during the same period of 2003,
$1,162 and $1,743 of which were  earned  during the third  quarters  of 2004 and
2003, respectively. Interest and other income were higher during the nine months
ended September 2004 because we received  reimbursement of property expenditures
that were incurred in previous years relating to a vacant  Property.  The former
tenant reimbursed these amounts as a result of its 1998 bankruptcy proceedings.

         Operating expenses,  including  depreciation and amortization  expense,
were  $828,693  during the nine months ended  September 30, 2004, as compared to
$709,140  during the same period of 2003,  $263,226  and  $222,941 of which were
incurred  during the quarters ended  September 30, 2004 and 2003,  respectively.
The  increase in  operating  expenses  during the quarter and nine months  ended
September 30, 2004, was partially due to incurring  additional general operating
and  administrative  expenses,  including,  primarily,  legal fees  incurred  in
connection  with  the  merger  transaction  described  above.  The  increase  in
operating  expenses  during the nine months  ended  September  30, 2004 was also
partially  attributable to an increase in state tax expense  relating to a state
in which we conduct business.

         We recognized income from discontinued operations (rental revenues less
property related expenses and provision for write-down of assets) of $76,478 and
$381,477 during the quarter and nine months ended  September 30, 2003,  relating
to the Properties in Tempe, Arizona;  Toccoa,  Georgia; Blue Springs,  Missouri;
Fultondale,  Alabama;  Black Mountain,  North Carolina;  Columbia,  Mississippi;
Crossville,  Tennessee;  Pensacola,  Florida,  Simpsonville,  South Carolina and
Columbus,  Georgia.  We  recorded  a  provision  for  write-down  of  assets  of
approximately  $57,700  during the quarter and nine months ended  September  30,
2003  related  to the  Property  in Tempe,  Arizona.  We sold this  Property  in
December 2003. We recognized income from discontinued  operations of $97,773 and
$373,975  during the quarter and nine months ended  September  30, 2004. We sold
the Toccoa, Georgia; Blue Springs, Missouri; and Fultondale,  Alabama Properties
in March  2004 and  recorded  an  aggregate  gain on  disposal  of  discontinued
operations of approximately  $968,900.  In October 2004, we sold the Property in
Columbia,  Mississippi,  as  described  above.  As  of  November  5,  2004,  the
Partnership  had not sold the  Properties  in Black  Mountain,  North  Carolina;
Crossville,  Tennessee;  Pensacola,  Florida;  Simpsonville,  South Carolina and
Columbus, Georgia.

                                       9
<PAGE>

         In December 2003,  the Financial  Accounting  Standards  Board issued a
revision to FASB Interpretation No. 46 (originally issued in January 2003) ("FIN
46R"),   "Consolidation  of  Variable  Interest  Entities"   requiring  existing
unconsolidated  variable  interest  entities to be consolidated by their primary
beneficiaries.  The primary  beneficiary  of a variable  interest  entity is the
party that  absorbs a  majority  of the  entity's  expected  losses,  receives a
majority  of its  expected  residual  returns,  or both,  as a result of holding
variable  interests,  which are the ownership,  contractual,  or other pecuniary
interests  in an  entity  that  change  with  changes  in the fair  value of the
entity's net assets excluding  variable  interests.  Prior to FIN 46R, a company
generally  included  another  entity  in its  financial  statements  only  if it
controlled  the  entity  through  voting  interests.  Application  of FIN 46R is
required in  financial  statements  of public  entities  that have  interests in
variable  interest  entities for periods ending after March 15, 2004. We adopted
FIN 46R  during  the  quarter  ended  March  31,  2004,  which  resulted  in the
consolidation of previously unconsolidated joint ventures, Williston Real Estate
Joint  Venture,  Bossier City Joint  Venture,  and CNL VIII, X, XII Kokomo Joint
Venture,  which had been accounted for under the equity method. FIN 46R does not
require, but does permit restatement of previously issued financial  statements.
We restated prior year's financial statements to maintain  comparability between
the  periods  presented.  Such  consolidation  resulted  in  certain  assets and
minority interests, and revenues and expenses, of the entities being reported on
a gross basis in our financial  statements;  however,  these restatements had no
effect on partners' capital or net income.


ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         Inapplicable.


ITEM 4.  CONTROLS AND PROCEDURES

         The  general  partners  maintain  a  set  of  disclosure  controls  and
procedures  designed to ensure that information  required to be disclosed in our
filings  under  the  Securities  Exchange  Act of 1934 is  recorded,  processed,
summarized and reported within the time periods  specified in the Securities and
Exchange  Commission's  rules and forms.  The principal  executive and financial
officers of the corporate general partner have evaluated our disclosure controls
and procedures as of the end of the period  covered by this Quarterly  Report on
Form 10-Q and have determined  that such disclosure  controls and procedures are
effective.

         There was no change in internal  control over financial  reporting that
occurred during the most recent fiscal quarter that has materially affected,  or
is  reasonably  likely to materially  affect,  internal  control over  financial
reporting.

                                       10

<PAGE>


                           PART II. OTHER INFORMATION


Item 1.   Legal Proceedings.   Inapplicable.
          ------------------

Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds.
          ------------------------------------------------------------
          Inapplicable.

Item 3.   Default upon Senior Securities.   Inapplicable.
          -------------------------------

Item 4.   Submission of Matters to a Vote of Security Holders.   Inapplicable.
          ----------------------------------------------------

Item 5.   Other Information.   Inapplicable.
          ------------------

Item 6.   Exhibits and Reports on Form 8-K.
          ---------------------------------

          (a)   Exhibits

                2.1     Agreement  and  Plan of  Merger  among  U.S.  Restaurant
                        Properties,  Inc., Ivanhoe Acquisition XII, LLC, and CNL
                        Income  Fund XII,  Ltd.,  dated as of  August  9,  2004.
                        (Included  as  Exhibit  99.2 to Form 8-K filed  with the
                        Securities  and Exchange  Commission  on August 9, 2004,
                        and incorporated herein by reference.)

                3.1     Affidavit and Certificate of Limited  Partnership of CNL
                        Income  Fund  XII,  Ltd.  (Included  as  Exhibit  3.2 to
                        Registration  Statement No. 33-43278-01 on Form S-11 and
                        incorporated herein by reference.)

                4.1     Affidavit and Certificate of Limited  Partnership of CNL
                        Income  Fund  XII,  Ltd.  (Included  as  Exhibit  3.2 to
                        Registration  Statement No. 33-43278-01 on Form S-11 and
                        incorporated herein by reference.)

                4.2     Amended and Restated Agreement of Limited Partnership of
                        CNL Income Fund XII,  Ltd.  (Included  as Exhibit 4.2 to
                        Form  10-K  filed  with  the   Securities  and  Exchange
                        Commission on April 15, 1993, and incorporated herein by
                        reference.)

                10.1    Management  Agreement  between CNL Income Fund XII, Ltd.
                        and CNL Investment Company. (Included as Exhibit 10.1 to
                        Form  10-K  filed  with  the   Securities  and  Exchange
                        Commission on April 15, 1993, and incorporated herein by
                        reference.)

                10.2    Assignment of Management  Agreement  from CNL Investment
                        Company to CNL Income Fund Advisors,  Inc.  (Included as
                        Exhibit 10.2 to Form 10-K filed with the  Securities and
                        Exchange  Commission on March 31, 1995, and incorporated
                        herein by reference.)

                10.3    Assignment of Management  Agreement from CNL Income Fund
                        Advisors,  Inc. to CNL Fund Advisors,  Inc. (Included as
                        Exhibit 10.3 to Form 10-K filed with the  Securities and
                        Exchange  Commission on April 1, 1996, and  incorporated
                        herein by reference.)

                10.4    Assignment  of  Management   Agreement   from  CNL  Fund
                        Advisors,  Inc. to CNL APF  Partners,  LP.  (Included as
                        Exhibit 10.4 to Form 10-Q filed with the  Securities and
                        Exchange Commission on August 13, 2001, and incorporated
                        herein by reference.)

                10.5    Assignment   of  Management   Agreement   from  CNL  APF
                        Partners, LP to CNL Restaurants XVIII, Inc. (Included as
                        Exhibit 10.5 to Form 10-Q filed with the  Securities and
                        Exchange Commission on August 13, 2002, and incorporated
                        herein by reference.)

                                       11
<PAGE>

                31.1    Certification  of Chief  Executive  Officer of Corporate
                        General  Partner  Pursuant  to Rule  13a-14  as  Adopted
                        Pursuant  to Section  302 of the  Sarbanes-Oxley  Act of
                        2002. (Filed herewith.)

                31.2    Certification  of Chief  Financial  Officer of Corporate
                        General  Partner  Pursuant  to Rule  13a-14  as  Adopted
                        Pursuant  to Section  302 of the  Sarbanes-Oxley  Act of
                        2002. (Filed herewith.)

                32.1    Certification  of Chief  Executive  Officer of Corporate
                        General  Partner  Pursuant to 18 U.S.C.  Section 1350 as
                        Adopted  Pursuant to Section  906 of the  Sarbanes-Oxley
                        Act of 2002. (Filed herewith.)

                32.2    Certification  of Chief  Financial  Officer of Corporate
                        General  Partner  Pursuant to 18 U.S.C.  Section 1350 as
                        Adopted  Pursuant to Section  906 of the  Sarbanes-Oxley
                        Act of 2002. (Filed herewith.)

                                       12
<PAGE>



                                   SIGNATURES


         Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended,  the  registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.

         DATED this 10th day of November 2004.


                                CNL INCOME FUND XII, LTD.

                                By:   CNL REALTY CORPORATION
                                      General Partner


                                      By:   /s/ James M. Seneff, Jr.
                                           -------------------------------------
                                           JAMES M. SENEFF, JR.
                                           Chief Executive Officer
                                           (Principal Executive Officer)


                                      By:   /s/ Robert A. Bourne
                                           -------------------------------------
                                            ROBERT A. BOURNE
                                            President and Treasurer
                                            (Principal Financial and
                                            Accounting Officer)


<PAGE>


                                  EXHIBIT INDEX

Exhibit Number

                Exhibits

                2.1     Agreement  and  Plan of  Merger  among  U.S.  Restaurant
                        Properties,  Inc., Ivanhoe Acquisition XII, LLC, and CNL
                        Income  Fund XII,  Ltd.,  dated as of  August  9,  2004.
                        (Included  as  Exhibit  99.2 to Form 8-K filed  with the
                        Securities  and Exchange  Commission  on August 9, 2004,
                        and incorporated herein by reference.)

                3.1     Affidavit and Certificate of Limited  Partnership of CNL
                        Income  Fund  XII,  Ltd.  (Included  as  Exhibit  3.2 to
                        Registration  Statement No. 33-43278-01 on Form S-11 and
                        incorporated herein by reference.)

                4.1     Affidavit and Certificate of Limited  Partnership of CNL
                        Income  Fund  XII,  Ltd.  (Included  as  Exhibit  3.2 to
                        Registration  Statement No. 33-43278-01 on Form S-11 and
                        incorporated herein by reference.)

                4.2     Amended and Restated Agreement of Limited Partnership of
                        CNL Income Fund XII,  Ltd.  (Included  as Exhibit 4.2 to
                        Form  10-K  filed  with  the   Securities  and  Exchange
                        Commission on April 15, 1993, and incorporated herein by
                        reference.)

                10.1    Management  Agreement  between CNL Income Fund XII, Ltd.
                        and CNL Investment Company. (Included as Exhibit 10.1 to
                        Form  10-K  filed  with  the   Securities  and  Exchange
                        Commission on April 15, 1993, and incorporated herein by
                        reference.)

                10.2    Assignment of Management  Agreement  from CNL Investment
                        Company to CNL Income Fund Advisors,  Inc.  (Included as
                        Exhibit 10.2 to Form 10-K filed with the  Securities and
                        Exchange  Commission on March 31, 1995, and incorporated
                        herein by reference.)

                10.3    Assignment of Management  Agreement from CNL Income Fund
                        Advisors,  Inc. to CNL Fund Advisors,  Inc. (Included as
                        Exhibit 10.3 to Form 10-K filed with the  Securities and
                        Exchange  Commission on April 1, 1996, and  incorporated
                        herein by reference.)

                10.4    Assignment  of  Management   Agreement   from  CNL  Fund
                        Advisors,  Inc. to CNL APF  Partners,  LP.  (Included as
                        Exhibit 10.4 to Form 10-Q filed with the  Securities and
                        Exchange Commission on August 13, 2001, and incorporated
                        herein by reference.)

                10.5    Assignment   of  Management   Agreement   from  CNL  APF
                        Partners, LP to CNL Restaurants XVIII, Inc. (Included as
                        Exhibit 10.5 to Form 10-Q filed with the  Securities and
                        Exchange Commission on August 13, 2002, and incorporated
                        herein by reference.)

                31.1    Certification  of Chief  Executive  Officer of Corporate
                        General  Partner  Pursuant  to Rule  13a-14  as  Adopted
                        Pursuant  to Section  302 of the  Sarbanes-Oxley  Act of
                        2002. (Filed herewith.)

                31.2    Certification  of Chief  Financial  Officer of Corporate
                        General  Partner  Pursuant  to Rule  13a-14  as  Adopted
                        Pursuant  to Section  302 of the  Sarbanes-Oxley  Act of
                        2002. (Filed herewith.)
<PAGE>

                32.1    Certification  of Chief  Executive  Officer of Corporate
                        General  Partner  Pursuant to 18 U.S.C.  Section 1350 as
                        Adopted  Pursuant to Section  906 of the  Sarbanes-Oxley
                        Act of 2002. (Filed herewith.)

                32.2    Certification  of Chief  Financial  Officer of Corporate
                        General  Partner  Pursuant to 18 U.S.C.  Section 1350 as
                        Adopted  Pursuant to Section  906 of the  Sarbanes-Oxley
                        Act of 2002. (Filed herewith.)


<PAGE>


                                  EXHIBIT 31.1




<PAGE>



                                  EXHIBIT 31.2




<PAGE>



                                  EXHIBIT 32.1



<PAGE>



                                  EXHIBIT 32.2